TOKYO (May 24): Benchmark Tokyo rubber futures erased early gains to close lower on Wednesday, tracking sharp falls in Shanghai futures after Moody’s Investors Service downgraded China’s credit ratings.
Moody’s downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years, saying it expected the financial strength of the economy to erode over the coming years as growth slows and debt continues to rise.
In response, China’s finance ministry said that the credit downgrade was based on inappropriate methodology, saying it was exaggerating difficulties facing the economy and underestimating reform efforts.
“When the sovereign grade was downgraded, that has an impact on individual firms, which may have been forced to unwind some positions in TOCOM,” said a Tokyo-based broker.
Tokyo Commodity Exchange (TOCOM) futures, which set the tone for tyre rubber prices in Southeast Asia, hit a six-week high in the morning on the back of a weaker yen against the dollar and firm oil prices.
The Tokyo Commodity Exchange rubber contract for October delivery finished 4.4 yen lower at 228.7 yen (US$2.04) per kg, after touching 236.7 yen earlier, the highest since April 11.
The most-active rubber contract on the Shanghai Futures Exchange for September delivery fell 380 yuan to finish at 13,700 yuan (US$1,989) per tonne after hitting a near three-week high on Tuesday.
The front-month rubber contract on Singapore’s SICOM exchange for June delivery last traded at 154.40 US cents per kg, down 1.3 US cents.
(US$1 = 111.8500 yen)
(US$1 = 6.8886 Chinese yuan)
